2015 (10) TMI 2453 - AT - Central Excise

CENVAT Credit - Whether appellant is required to debit an amount of Cenvat Credit proportional to the utilisation of steam in non-productive use in canteen and laundry or otherwise - Held that - Cenvat Credit on furnace oil is eligible to be availed by the appellant as they are utilising the steam produced by using furnace oil for manufacturing of final products in factory premises. It is also undisputed that some part of the steam is utilised in canteen and laundry. - Requirement of a canteen in the factory is statutorily mandated in the factories act the cleaning of the utensils in the canteen for providing hygienic food cannot be disputed by any one. Again using of clean uniform in the course of manufacturing of final products cannot also be disputed as unwanted expenses. On this factual matrix we find that the steam which is used in the factory premises is in a way related to manufacturing of final products. - In the said case of Indo Rama(2007 (7) TMI 315 - HIGH COURT OF JUDICATURE AT BOMBAY) their Lordships were considering the use of electricity generated in the factory and the above observations were made while denying the proportionate Cenvat Credit on the fuel used in that portion of electricity which is used for lighting the residential quarters. We find that the said observations will apply in the case in hand as it is undisputed that the canteen services and the laundry service is used within the factory and in a way related to manufacturing activity - impugned orders are unsustainable and liable to be set aside and - Decided in favour of assessee.

Summary

Issues:
- Availing Cenvat Credit on Central Excise duty paid on furnace oil used for steam production.
- Utilization of steam in canteen and laundry for non-productive purposes.
- Interpretation of the phrase "for any other purposes" in relation to manufacturing activities.

Analysis:
The judgment involves three appeals challenging Orders-in-Appeal related to availing Cenvat Credit on furnace oil used for steam production, specifically focusing on the utilization of steam in canteen and laundry for non-productive purposes. The key issue revolves around whether the steam used for non-productive purposes can be considered as being used in or in relation to the manufacture of final products. The appellant argues that the canteen services and laundry activities are essential for the manufacturing process, citing the statutory mandate for canteens and the necessity of clean uniforms for employees. The departmental representative, however, relies on a High Court judgment to support the contention that the electricity or steam used must have a nexus with the goods manufactured in the factory to be eligible for credit.

Upon considering the submissions and perusing the records, the Tribunal delves into the interpretation of the phrase "for any other purposes" in the context of manufacturing activities. It is established that the Cenvat Credit on furnace oil is eligible as long as the steam is used for manufacturing final products, even if a portion is utilized in non-productive areas like canteen and laundry within the factory premises. The Tribunal emphasizes the statutory requirement of a canteen in the factory and the necessity of clean uniforms for manufacturing activities, aligning with the argument that such uses are related to the manufacturing process.

Drawing parallels with a previous High Court judgment regarding the use of electricity in a factory, the Tribunal concludes that the proportionate Cenvat Credit on the fuel used for steam in non-productive areas within the factory premises should be allowed. In light of the factual matrix and the statutory requirements, the Tribunal sets aside the impugned orders and allows the appeals with consequential relief. The judgment highlights the importance of considering the purpose and nexus of utility within the factory premises when determining the eligibility of Cenvat Credit in such scenarios.